05/12/2014 |
Argentina plans to sell dollar-denominated bonds for the first time since its overseas notes went into default five months ago as it seeks to roll over part of its debt coming due next year...
The government will issue $3 billion of bonds due in 2024 that will be governed by local laws. It will also offer owners of $6.3 billion in similar notes due in 2015 the chance to sell the securities back to the government or swap them into the new bonds. The proposed transactions, because they would be done under Argentine law, aren’t subject to a U.S. court ruling that is preventing the nation from paying its overseas debt.
Argentina, which hasn’t sold international bonds since defaulting in 2001, has about $12 billion of debt due in 2015, equal to about 40 percent of its international reserves. In July, the nation defaulted on its foreign law bonds again after refusing to comply with a U.S. court order that it must pay a group of holdout investors from its 2001 default in full before servicing any of its other overseas bonds.
“It’s a step in the right direction,” Jorge Piedrahita, the chief executive officer of Torino Capital LLC, said by phone from New York. “If they can do a swap to extend their maturities, it’s good news because if not Argentina has very heavy maturities for next year.”
Economy Minister Axel Kicillof told reporters today that the government is offering to buy back so-called Boden bonds maturing in October 2015 at 97 cents on the dollar if investors opt to cash out by Dec. 12. Boden holders can also opt to swap their notes for the 10-year securities known as Bonar 24s. Argentina sold $3.25 billion of those securities in May.
‘Willingness to Pay’
“We’re going to pay in advance because we have the capacity and willingness to pay and because we want to cut out speculative maneuvers,” Kicillof said. “We’re paying next year’s maturity which is the biggest in the past 10 years.”
Investors who accept the swap will receive 99.7 cents of 2024 bonds for every dollar of 2015 bonds. Argentina will offer an additional $1.54 in cash for every $100 of Boden 15 bonds, according to an e-mailed statement from the Economy Ministry.
“I am happy that Argentina offered it to all frightened investors,” Lutz Roehmeyer, who oversees about $1 billion of emerging-market debt at LLB Invest, including the Boden 15 notes, said by e-mail. “The more people who now cash in and swap into the longer-term bonds, the better it is for us because our bonds will be safer with less refinancing pressure.”
He said he won’t enter the transaction because he isn’t concerned about the government’s ability to repay in 2015.
Bond Prices
Bondholders who accept the swap or buyback would lose money on their notes with today’s prices. The 2015 notes climbed to 97.91 cents on the dollar at 3:15 p.m. in New York, close to their highest price since the default in July. The 2024 bonds fell 0.2 cent to 95.79 cents on the dollar, according to data compiled by Bloomberg.
“The exchange ratio results in a loss of value, but you do the trade if you are bullish on Argentina and want to extend duration and benefit from expected yield compression,” Marco Santamaria, a money manager at AllianceBernstein LP, said by e-mail. “Unless you hold huge amounts of Boden 15s, you are better off doing that in the market than in the swap.”
Going forward, government maturities will drop to an average of $2 billion per year, Kicillof said. The government isn’t hiring any international banks to advise on the transactions, he said.
Source:
businessweek
